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Thursday, January 28, 2016

Recalibrated Budget 2016: in touch with reality

Salleh Said Keruak

Even the best economic minds were not able to forecast what was going to happen one year down the road. What is happening today is reminiscent of what happened in 1985 and 1997 when economies all over the world took a slide down the slippery slope.

What Prime Minister Najib Tun Razak did today was basically to be in touch with reality. 2016, and probably even 2017 as well, are going to be full of uncertainties. That means Budget 2016, which was planned since the middle of last year before the fall in the price of crude oil, would need to be recalibrated.

When Budget 2016 was tabled in Parliament last October the crude oil price was US$48 per barrel. Since then it went down to US$30 per barrel and there is no guarantee the price will not go down even further. That is the reality that we must face up to.

And this is what the Prime Minister has done. It is as those in the financial world would say: cutting away the fat while not breaking any bones. The most important aspect of Budget 2016 is that the country’s debts would be reduced and would not exceed 55% of the GDP.

Malaysia would also not resort to imposing capital controls or to the pegging of the Ringgit like what happened during the 1997-1998 financial crisis. This is further to the other eleven recalibrated measures that were announced.